China tightens control over IPO pricing, sanctions 19 institutions

SHANGHAI, Aug. 14 (Reuters) – China’s securities regulators have sanctioned 19 institutional investors as the authorities tighten their control over pricing behavior under a more liberalized listing system.

China launched the technology-focused STAR Marketplace in Shanghai in mid-2019, along with the introduction of a registration-based American-style Initial Public Offering (IPO) system in this market.

The China Securities Association (SAC) said Friday evening that a recent joint investigation with the Shanghai Stock Exchange into STAR’s IPOs revealed problems with 19 institutional investors.

The problems included weak internal controls, inadequate justification for pricing, failure to follow stipulated procedures and improper storage of working documents, the SAC said in a statement, without identifying the companies.

One insurer was temporarily barred from participating in the institutional portion of IPO underwriting, while eight fund companies and one asset manager were barred from the equity market for a month, the statement said.

SAC said regulators will strengthen supervision and step up sanctions against bad behavior in order to police IPO pricing and protect investors.

China has already replicated the IPO system based on registration with the board of directors of Shenzhen start-up ChiNext and aims to gradually roll out the mechanism to the rest of the Chinese stock market, which uses always a system based on approvals from regulators.

Reporting by Samuel Shen and Andrew Galbraith; Editing by Kim Coghill

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